(Corrects value of proposed Safran offer to 29.47 euros from
29.37 euros, para 13)
* Zodiac says CEO offered to resign, to stay on for a while
* Hopes to complete Safran merger deal, studies alternative
* Issues second profit warning in as many months
* Shares recover partially after sharp fall on Thursday
By Tim Hepher and Cyril Altmeyer
PARIS, April 28 Zodiac Aerospace said
its chief executive planned to quit and added to a litany of
profit warnings as it reaffirmed hopes of merging with engine
maker Safran to end a prolonged crisis in its aircraft
The French firm said it had asked CEO Olivier Zarrouati to
stay on "for a while" to try to complete the $9 billion merger,
but added it was working on a backup plan in case the idea to
forge the world's third-largest aero supplier fell through.
The companies announced plans for Safran to take control in
January, but the deal ran into criticism from some shareholders
and uncertainty created by new problems at Zodiac's UK plants.
Zodiac said it had appointed a new special board adviser and
asked Zarrouati to stay on for an unspecified period to focus on
finalising and executing the merger "if Safran and Zodiac come
to a renewed agreement, which is what we want."
Speaking to reporters in a conference call, Zarrouati
described the tie-up as "our priority scenario".
But he said an alternative was necessary due to obstacles
faced by the merger proposal.
In a delayed announcement that was postponed by a week due
to what Zodiac described as pressure of work, the company posted
a fiscal first-half current operating loss of 12 million euros,
blamed mainly on its aircraft interiors business.
It forecast a 200-220 million euro current operating profit
for the year to end-August 2017 as a whole, implying a decline
of up to 26 percent from the previous year's 269.6 million
euros. In March it had forecast a 10-20 percent decline.
Zarrouati, who has overseen some 10 profit warnings since
Zodiac first discovered it could not keep pace with a boom in
airline orders for its aircraft interiors, said Zodiac had added
"an extra layer of caution" to its forecasts.
But the strongest critic of the deal, UK hedge fund TCI Fund
Management, said the second profit warning in as many months
cast doubt on its predictions of a strong second-half recovery.
"These are disastrous results from Zodiac yet again...
Zodiac's business continues to implode with no sign of
recovery," TCI founder Christopher Hohn said.
"Zodiac is in serious financial difficulty and we think it
needs an emergency rights issue, which would cause the Zodiac
share price to fall substantially," he said in an emailed
statement, adding that the appointment of a new special board
adviser was a distraction from the company's problems.
TCI has waged a public campaign to persuade Safran to cancel
its proposed 29.47 euros a share offer for Zodiac, which it says
would pay almost three times what Zodiac is worth.
But shares in Zodiac recovered some ground after falling
sharply ahead of the results. They were up around 2.8 percent at
21.43 euros in early trading, but still well below the
anticipated offer price.
Zodiac plans to speed up its restructuring, Zarrouati said.
Talks with Safran are proceeding well, and Zodiac is waiting
for Safran's conclusions on a due-diligence exercise, he added.
Safran had no immediate comment.
(Reporting by Tim Hepher, Cyril Altmeyer; Editing by Andrew
Callus and Keith Weir)